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Vanguard's low cost UK launch to spark price war

Vanguard has launched its direct-to-consumer online investment service, charging an annual account fee of just 0.15 per cent.

The service will have a minimum lump sum investment of £500 or a minimum monthly contribution of £100.

There will be no account fee above the first £250,000 invested, meaning this fee is effectively capped at £375 a year.

On top of this investors will be charged an ongoing charge for the funds, which across Vanguard’s proposition averages out at just 0.14 per cent.

Ryan Barrows, head of personal investing for Vanguard, said charges for the service could come down even further if it proves popular enough.

He said: “We are quite proud of the fact the vast majority will pay less than 40 basis points all in.

“As we continue to grow here, we fully anticipate we would give our investors the benefits of that scale.”

In the US, Vanguard does not charge a platform fee, meaning investors only pay for the funds.

When asked whether the British service could reach this point, Sean Hagerty, head of Vanguard’s European business, said it was too early to tell.

Mr Hagerty also refused to commit on bringing Vanguard’s Personal Advisor Service, which offers hybrid face-to-face advice with robo-advice, to the UK.

Since its launch in the US in 2015 the Personal Advisor Service has swelled to become one of the world's largest robo-advice providers with assets of around $40bn (£31bn).

Mr Hagerty said Vanguard did not have any plans to bring it to the UK “at this time”.

The new service will give investors access to Vanguard’s range, including its Life Strategy range, index funds, ETFs, target retirement funds and actively managed funds.

These will be available through an Isa, Junior Isa or general account, with a self-invested personal pension launching “in due course”.

While Vanguard will not be offering portfolios like other robo-advisers, Mr Barrows said some of its existing funds would do the same job.

He said: “We clearly believe in diversification and we believe most investors should offer a broadly diversified portfolio but we have single fund solutions that are effectively a portfolio of our other funds.

“We didn’t feel the need on top of that to provide a portfolio solution.”

He pointed out that funds in Vanguard’s LifeStrategy range have access to tens of thousands of underlying assets.

An investor who put £10,000 into Vanguard’s LifeStrategy 100% Equity fund would pay £37 a year in fees, while investing the same amount in the Vanguard FTSE UK All Share Index Unit Trust would mean paying £23 a year in fees.

The cheapest fund on the platform is the FTSE 100 Index Unit Trust, costing just 0.06 per cent, meaning that investing in this fund would cost just 0.21 per cent in total.

Holly Mackay, managing director of Boring Money, said: “The launch from Vanguard is great news for suspicious savers who are fed up with cash and want a low-cost straightforward alternative.